@ragica it's worked the opposite way so far.

People who made a bunch of communities and then didn't participate are the ones who were displaced after the update by active mods. I help out at a couple like that myself.

The system can always be tweaked if it doesn't scale right, but for now it's been quite revitalizing.

and just start squatting (so to speak) on the mod rights to communities

That already happens "manually". Two of the communities I mod were originally created by community name squatters who grabbed a bunch of "popular" names and then basically abandoned the site the same day. One of those two users had created 25+ communities just to sit on the names. And one of the "partner communities" on a different instance was created by someone who put zero effort into creating content - they only opened a magazine and expected others to do all the work, then eventually abandoned it when they lost interest (hasn't been online in 2 months). Luckily that magazine was recently adopted by someone who seems a lot more invested and active, but that doesn't change the fact that the magazine had been "dead" for months prior to the new owner taking over.

Granted, an automated system would make it easier for squatters to just kinda program a queue of communities they want to grab, but the problem itself already exists even without an automated system.